Peduto: Continue state oversight of Pittsburgh

PITTSBURGH (AP) – The city’s new mayor has asked Gov. Tom Corbett to keep Pittsburgh under Act 47 state oversight for financially distressed municipalities, saying that while city finances have improved, more economic reforms are needed.

Mayor Bill Peduto was sworn in Monday and released his letter to the governor Wednesday.

The city was granted Act 47 status in December 2003, under then-Mayor Tom Murphy. It enacted a financial recovery plan in 2004 and amended the plan in 2009 under Peduto’s predecessor, Luke Ravenstahl.

Ravenstahl, who opted not to run for re-election, left office with six straight balanced budgets. He saw the city’s credit rating rebound from junk-bond status and its pensions funded above the 50 percent level required by state law.

Ravenstahl, a Democrat, successfully lobbied Act 47 overseers in the Republican governor’s administration to recommend in late 2012 that the city be removed from state oversight – a move Peduto, also a Democrat, opposed. But the city remained under Act 47 as Ravenstahl left office.

The two have battled for years for control of the city’s Democratic base and Ravenstahl backed other candidates in the primary for mayor.

In his letter, Peduto asked Corbett for time to craft “an exit plan from Act 47 that will leave our city truly fiscally sound and ready to move forward with confidence toward a new era of prosperity for our citizens.” He contends in the letter that the city needs additional reforms to keep pensions solvent in the long run and to improve debt management.

Corbett’s office referred questions about the letter to the Pennsylvania Department of Community & Economic Development. Department spokesman Steve Kratz said the agency will take Peduto’s letter into consideration but the mayor’s request won’t be the deciding factor in the decision on whether to keep state oversight in place.

Peduto also wants to establish a long-term PILOT – or payment in lieu of taxes – program with the city’s nonprofits. His letter doesn’t name specific nonprofits, but makes clear he wants more money from them.

“We must develop a sustainable stream of compensation for the services that our city provides to large nonprofit institutions so that we can achieve the other measures of fiscal health laid out above without raising taxes on our residents,” Peduto wrote.

City officials have long complained that nonprofits have weakened Pittsburgh’s tax base because about a third of the real estate is exempt from taxes.

A loosely-formed consortium of nonprofits has contributed to public services since 2005, when over 100 tax-exempt property owners contributed about $14 million. But the total fell to about $2.6 million in 2011 before the last agreement expired. The last group to contribute to what’s been called the Pittsburgh Public Service Fund included 41 members, including the University of Pittsburgh and other schools, health insurer Highmark Inc., and the city’s major churches, according to the National Council of Nonprofits.

The University of Pittsburgh Medical Center has been exempted because it contributed $100 million to Ravenstahl’s pet project, the Pittsburgh Promise, which offers college scholarships to students who graduate from the city’s public schools.

Before he left office, Ravenstahl sued UPMC seeking to revoke its nonprofit status, arguing the hospital network acts more like a private business than a charity. UPMC countered with claims of more than a half billion dollars’ worth of charitable spending, including free health care and donations to other nonprofits.

In response to Peduto’s letter, UPMC spokesman Paul Wood said Wednesday: “We look forward to a productive relationship with the new mayor.” According to the hospital, UPMC provided $887 million last year in IRS-defined community benefits, in addition to its Pittsburgh Promise contribution.

Pitt spokesman Ken Service said the city should make nonresidents who work in Pittsburgh pay more than a $52 annual municipal services tax. He said the city’s universities and hospitals have “been at the center of the city’s renaissance.”

“It would be particularly unfortunate if a new administration chose to target institutions of higher education, which already are struggling under the burden of deep cuts in state support and now also are feeling the negative impacts of federal funding cuts as well,” Service wrote.